Tuesday, December 28, 2010

Window on Eurasia: Russia Emerging from Crisis Even More Dependent on Raw Materials Exports than Before, Duma Budget Committee Member Says

Paul Goble

Staunton, December 28 – Not only is Russia’s economic recovery once again based on rising world prices for oil and other natural resources, but the country is “coming out of the [recent] crisis” even more dependent on such export earnings that it was earlier, according to a member of the Duma budget and taxation committee.
In an article in “Sovetskaya Rossiya,” Oksana Dmitriyeva, a member of the Just Russia Party, points out that neither tax revenue nor general economic growth has come close to keeping up with average price rises for export commodities, a pattern pointing to serious underlying problems (www.sovross.ru/modules.php?name=News&file=article&sid=587197).
Specifically, she says, raw material export prices have gone up on average 30 percent over the last year while budget income has risen only 17 percent and “general economic growth” in the Russian Federation” has been “only 3.6 percent.” That shows to what degree Russia remains a raw materials exporter rather than a diverse modern economy.
How can we talk about modernization, she asks. This situation highlights the further “degradation” of domestic branches of the economy, something that has been partially hidden by the government’s understanding of “the struggle with the crisis as the distribution of subsidies and guarantees to a limited number of enterprises.”
But these subsidies and guarantees cannot in and of themselves end the crisis or lead to a restructuring of the economy, Dmitriyeva says. Instead what is needed is a combination of “tax, exchange rate, credit and budgetary policies” that the government has not seen fit to engage in, apparently in the belief that the rising tide of oil prices will lift all ships.
Among the major problems is that there has not been any “tax stimulation of innovative branches.” Indeed, even the actual subsidies to these branches that the current Russian government has actually advanced rather than simply talked about equal less than one-tenth of one percent of the budget.
“This is a nano-unit,” Dmitriyeva says, thereby making fun of President Dmitry Medvedev’s discussions of nano-technology, and “from it,” she says, there has been a nano-result.” Meanwhile, however, one branch has received significant tax preference stimulation: oil companies in Eastern Siberia, but not even the processing facilities within that branch.
The Russian government’s “policy of the dear ruble has led to a growth in imports,” she notes. “Between September 2009 and September 2010, there was a 13 percent increase in exports but a 32 percent growth in imports. But there was none of the “import substitution” that one might expect to happen with raw materials earnings.
Instead, there has been a reduction of government expenditures and the maintenance of the stabilization fund, “even though it is clear that [such reductions] in government spending and a reduction in the budget deficit are not reducing inflation. Inflation [in Russia] comes not from government expenditures but from the growth of tariffs.”
“How does this situation threaten us?” she asks. “If the entire world is developing on the trajectory of ‘growth – crisis – growth,’ then [Russia] is developing on the line of ‘stagnation – crisis – stagnation.’” That pattern, she concludes, represents “a threat to national security and [even] the existence of the country.”

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